IRS Deductions and Credits 3

Question 1

Which of the following is a refundable tax credit?

Accepted Answer

Earned Income Tax Credit

Answer

The Earned Income Tax Credit is fully refundable, meaning it can reduce tax liability below zero and result in a refund.

Question 2

What is the maximum amount of student loan interest a taxpayer may deduct per year?

Accepted Answer

$2,500

Answer

Taxpayers may deduct up to $2,500 in student loan interest paid during the year, subject to income phase-outs.

Question 3

The American Opportunity Tax Credit provides up to how much per eligible student per year?

Accepted Answer

$2,500

Answer

The AOTC provides up to $2,500 per student for qualified education expenses in the first four years of higher education.

Question 4

For the home office deduction simplified method, what is the deduction per square foot?

Accepted Answer

$5

Answer

The simplified method allows a $5 per square foot deduction for up to 300 square feet of home office space.

Question 5

Which of the following expenses qualifies as a miscellaneous itemized deduction under current law?

Accepted Answer

Gambling losses to the extent of gambling winnings

Answer

The TCJA suspended most miscellaneous itemized deductions; gambling losses offset against winnings remain deductible.

(IRS) Internal Revenue Service Certified Practice Test